This is Why Microsoft Corporation Will Win the Cloud Wars

The king of software is in the early stages of a resurgence, and its cloud business unit is a big part of the reason why.

Tim Brugger
Tim Brugger
Nov 10, 2014 at 11:00AM
Technology and Telecom

Even as Google (NASDAQ:GOOG) (NASDAQ:GOOGL) and (NASDAQ:AMZN) continue to wage war on each other, scratching and clawing their way to expanding their respective cloud hosting client bases, Microsoft (NASDAQ:MSFT) is going about its cloud computing efforts in a slightly different fashion.

The back-and-forth between the two cloud behemoths -- including Google's recent cloud services upgrades and yet another price cut, which was then matched by Amazon's unlimited photo storage offer -- is great news for Microsoft fans. Why? Because Microsoft's figured out the real opportunity to generate cloud revenues isn't hosting, that's already a commoditized business. Delivering its suite of software products via the cloud, and continuing to add solutions and delivery channels via strategic partnerships is where Microsoft CEO Satya Nadella is focusing his efforts, just as he should.

Can't we all just get along?
Microsoft's cloud-based solutions, particularly its Office 365, Azure platform, and Dynamics CRM, were largely responsible for what turned out to be an outstanding fiscal year 2015 first quarter. With yet another triple-digit quarter of cloud growth, Microsoft has found the winning formula in its drive to win the cloud wars. Though Microsoft's suite of solutions delivered via the cloud on its Windows and Windows Phone operating systems is working, Nadella is actively expanding his Software-as-a-Service, or SaaS, line-up.

It was just a few weeks ago Microsoft announced a strategic alliance with (NYSE:CRM), one of the original cloud providers, at the customer relationship management leader's annual Dreamforce conference. At first glance, a partnership with seems counter-intuitive; after all, Microsoft's Dynamics CRM is a direct competitor.

But even if Dynamics CRM sales are negatively affected, which is possible though any impact would likely be negligible, the upside of integrating Office 365, Windows, and business intelligence solutions with's industry-leading CRM customer base is too good to pass up. As Nadella put it, "Our focus is on empowering every individual and organization on the planet [to] be more productive – and that's exactly what this partnership will fuel." Apparently, Nadella wasn't done expanding Microsoft's cloud-based services, either.

If one is good, two is better
Microsoft's recent announcement that it's partnered with photo, video, and file-sharing provider Dropbox may have left a few folks scratching their heads. But integrating Office 365 with Dropbox, including iOS and Android OS mobile devices in the coming weeks, will allow users to edit Office documents directly from their Dropbox app, and access their Dropbox accounts from Office, expanding the scope of each solution.

Just as with the alignment, Microsoft seems to have gotten the better end of the Dropbox bargain. With over 300 million users, presumably some of which are not existing Office 365 owners, a deal with Dropbox puts Microsoft directly in the sights of millions of prospective new customers, while expanding Office 365's capabilities. Not a bad deal for either partner, but its Microsoft that's likely to enjoy the biggest impact on revenues, all delivered via the cloud.

With an annual run-rate of about $4.5 billion, Microsoft's cloud revenues are at, or near, the top of the heap. Considering how late Microsoft was to the cloud wars, its current leadership position is that much more remarkable. And with Office 365 for iOS in full swing, and an Android-friendly version imminent, Microsoft's mentality of getting its solutions into the hands of as many users as possible -- regardless of OS or indirect sales channels -- is working like a charm.

Strategic alliances with "competitors," as was the case with, or developing Microsoft services for iOS or Android devices? Unheard of in the days of the old Microsoft, but as an exec said recently, "We are trying to get Office into as many people's hands as possible – on any device and any endpoint. Android is ready. There's no reason to hold it back. In a previous strategy for Microsoft, maybe we would have held one for the other."

Nadella's spot on with his cloud strategy: let Google and fight over the cloud hosting crumbs; Microsoft's path to the top will come via SaaS solutions, delivered to as many customers as possible, in any way possible, including strategic partners.